TRS Fund Support for internet Protocol Captioned Telephone Service Compensation
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Abstract
In this document, the Federal Communications Commission (Commission or FCC) adopts a revised, five-year plan for support of internet Protocol Captioned Telephone Service (IP CTS) by the Interstate Telecommunications Relay Services Fund (TRS Fund). To ensure that IP CTS providers have the appropriate incentive structure to support captioning with communications assistants (CAs) and with only automatic speech recognition (ASR), the Commission establishes separate compensation formulas for CA-assisted and ASR-only IP CTS. In addition, this compensation plan will give providers certainty regarding the applicable compensation levels, provide an incentive to improve efficiency, and allow the Commission an opportunity to timely reassess the compensation formulas in response to potential unanticipated cost changes and other significant developments.
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<title>Federal Register, Volume 89 Issue 171 (Wednesday, September 4, 2024)</title>
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[Federal Register Volume 89, Number 171 (Wednesday, September 4, 2024)]
[Rules and Regulations]
[Pages 71848-71860]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-19559]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 64
[CG Docket Nos. 22-408, 03-123, and 13-24; FCC 24-81; FR ID 241645]
TRS Fund Support for internet Protocol Captioned Telephone
Service Compensation
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: In this document, the Federal Communications Commission
(Commission or FCC) adopts a revised, five-year plan for support of
internet Protocol Captioned Telephone Service (IP CTS) by the
Interstate Telecommunications Relay Services Fund (TRS Fund). To ensure
that IP CTS providers have the appropriate incentive structure to
support captioning with communications assistants (CAs) and with only
automatic speech recognition (ASR), the Commission establishes separate
compensation formulas for CA-assisted and ASR-only IP CTS. In addition,
this compensation plan will give providers certainty regarding the
applicable compensation levels, provide an incentive to improve
efficiency, and allow the Commission an opportunity to timely reassess
the compensation formulas in response to potential unanticipated cost
changes and other significant developments.
DATES: Effective October 4, 2024.
FOR FURTHER INFORMATION CONTACT: Michael Scott, Consumer and
Governmental Affairs Bureau, 202-418-1264, <a href="/cdn-cgi/l/email-protection#d69bbfb5beb7b3baf885b5b9a2a296b0b5b5f8b1b9a0"><span class="__cf_email__" data-cfemail="531e3a303b32363f7d00303c2727133530307d343c25">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order and Order (Report and Order), in CG Docket Nos. 22-408, 03-
123, and 13-24; FCC 24-81, adopted and released on July 31, 2024. The
Commission previously sought comment on these issues in a notice of
proposed rulemaking, released on December 22, 2022, and published at 88
FR 7049, February 2, 2023 (NPRM). The full text of this document can be
accessed electronically via the FCC's Electronic Document Management
System (EDOCS) website at: <a href="https://docs.fcc.gov/public/attachments/FCC-24-81A1.pdf">https://docs.fcc.gov/public/attachments/FCC-24-81A1.pdf</a> or via the FCC's Electronic Comment Filing System (ECFS)
website at: <a href="http://www.fcc.gov/ecfs">www.fcc.gov/ecfs</a>. To request materials in accessible
formats for people with disabilities (Braille, large print, electronic
files, audio format), send an email to: <a href="/cdn-cgi/l/email-protection#24424747111410644247470a434b52"><span class="__cf_email__" data-cfemail="365055550306027650555518515940">[email protected]</span></a> or call the
Consumer and Governmental Affairs Bureau at: (202) 418-0530 (voice).
Synopsis
1. Section 225 of the Communications Act of 1934, as amended (the
Act), 47 U.S.C. 225, requires the Commission to ensure that
telecommunications relay services (TRS) are available to persons who
are deaf, hard of hearing, or deafblind or have speech disabilities,
``to the extent possible and in the most efficient manner.'' TRS are
defined as ``telephone transmission services'' enabling such persons to
communicate by wire or radio ``in a manner that is functionally
equivalent to the ability of a hearing individual who does not have a
speech disability to communicate using voice communication services.''
IP CTS, a form of TRS, permits an individual who can speak but who has
difficulty hearing over the telephone to use a telephone and an
internet Protocol (IP)-enabled device via the internet to
simultaneously listen to the other party and read captions of what the
other party is saying. IP CTS is supported entirely by the TRS Fund,
which is composed of mandatory contributions collected from
telecommunications carriers and Voice over internet Protocol (VoIP)
service providers based on a percentage of each company's annual
revenue. IP CTS providers receive monthly payments from the TRS Fund to
compensate them for the reasonable cost of providing the service, in
accordance with a per-minute compensation formula approved by the
Commission.
2. Before 2020, IP CTS captions were produced by a CA, usually with
the CA repeating (``revoicing'') a caller's speech into an ASR program,
which then converted the CA's speech to text. In 2018, the Commission
ruled that IP CTS also could be provided on a fully automatic basis,
using only ASR technology to generate captions, without the
participation of a CA.
3. Before 2018, compensation for IP CTS providers was determined by
a proxy method, known as the Multistate Average Rate Structure (MARS)
methodology, in which compensation was set equal to the average per-
minute payment by state TRS programs to providers of an analogous
service,
[[Page 71849]]
Captioned Telephone Service (CTS). In 2018, the Commission determined
that this approach had resulted in providers receiving compensation
substantially higher than the industry average cost to provide IP CTS.
Therefore, the Commission adopted a different methodology, setting
compensation based on the weighted average of the actual allowable
costs reported by providers (that is, total allowable expenses of all
providers divided by total IP CTS minutes). In the 2020 IP CTS
Compensation Order, published at 85 FR 64971, October 14, 2020, the
Commission considered whether to adopt a separate compensation formula
for calls captioned without CA involvement, to address what appeared to
be the substantially lower average cost of ASR-only captioning.
However, the Commission concluded it did not yet have sufficient data
from the provision of fully automatic IP CTS to accurately estimate the
relevant costs.
The 2022 Notice of Proposed Rulemaking
4. On December 22, 2022, the Commission released an NPRM seeking
comment on establishing a revised IP CTS compensation plan. The
Commission proposed to apply different compensation formulas to the
provision of CA-assisted and ASR-only IP CTS and sought comment on
additional issues potentially affecting the compensation formulas,
including the appropriate application of such formulas; identifying the
costs attributable to ASR-only captioning; whether to adjust certain
allowable-cost criteria and the allowed operating margin; calculation
of average per-minute cost and compensation level(s); the duration of
the compensation period; adjustment factors for inflation or
productivity; and alternatives to reasonable-cost-based compensation.
Separate Rates for CA-Assisted and ASR-Only IP CTS
5. The Need for Separate Rates. The Commission amends its rules to
establish separate rates for CA-assisted and ASR-only IP CTS.
Historically, while the Commission has applied separate compensation
rates to different relay services, the Commission has rarely applied
separate rates to different methods of providing a single relay
service. In this instance, however, the record supports the
Commission's initial view that special considerations warrant the
application of different compensation formulas to the CA-assisted and
ASR-only modes of providing IP CTS. The record also supports the
concern that continued application of a single formula may lead to
waste of TRS Fund resources and increase the risk of fraud and abuse.
Deferring the adoption of separate formulas would prolong the adverse
effects of the single rate and discourage providers from continuing to
offer CA-assisted captioning, reducing the availability of a service
mode that continues to be preferred for some calls.
6. Cost Difference. The updated cost reports confirm that there is
a substantial cost difference between ASR-only and CA-assisted IP CTS.
For 2023, historical allowable expenses reported by providers average
approximately $0.60 per minute for ASR-only IP CTS and $1.04 per minute
for CA-assisted IP CTS, a cost difference of $0.44 per minute. For
2024, providers' projected allowable expenses average approximately
$0.65 per minute for ASR-only IP CTS and $1.32 per minute for CA-
assisted IP CTS, a cost difference of $0.67 per minute.
7. Benefits of CA-Assisted Service. The record also confirms that,
while consumers increasingly select ASR-only captioning when offered a
choice, CA-assisted captioning continues to be preferred for some
portion of IP CTS calls. Further, some research indicates that ASR
technology may show algorithmic bias in the accuracy with which it
transcribes voices and that the participation of CAs may improve the
accuracy of captioning for a substantial portion of calls. Establishing
separate formulas that better reflect the cost difference between ASR-
only and CA-assisted service will strengthen the incentive for
providers to continue providing CA-assisted captions when preferred by
the consumer or needed for high-quality service. Conversely,
maintaining a single rate is likely to reinforce what appears to be a
substantial incentive for providers to limit the use of the CA-assisted
mode, even where a consumer would prefer it. Once ASR-only service was
introduced by most providers, it quickly became the most commonly used
service mode--averaging 43.5% of compensable minutes in 2022, 74.6% in
2023, and a projected 84.5% in 2024. Although the percentage of ASR-
only use is different for each provider, as of December 2023, average
CA-assisted usage (as a percentage of total minutes) is substantially
higher for providers that offer consumers a choice of service mode than
for providers that unilaterally determine the service mode.
8. TRS Fund Stewardship Concerns. The current single rate of $1.30
per minute became effective July 1, 2021, when approximately 15% of IP
CTS minutes were ASR-only. As the volume of ASR-only service has
increased, the average per-minute cost of IP CTS has declined,
resulting in excessive compensation at the current single rate. In
2023, compensation for ASR-only minutes produced an operating margin of
$0.70 per minute--116.7% above expenses. Moving ASR-only compensation
closer to actual cost will conserve the TRS Fund and may decrease the
potential incentive for a provider to engage in fraudulent practices.
9. Need for Metrics. Various parties argue that it would be better
as a matter of policy and good governance for the Commission to
establish service quality metrics before resetting IP CTS compensation
rates. Progress has been made toward establishing metrics. In February
2023, the MITRE Corporation (MITRE), in its capacity as a Federally
Funded Research and Development Center, formed a working group to
develop a recommendation on metrics and measures for IP CTS service
quality. The working group, composed of community advocates, IP CTS
providers, academia, and subject matter experts from related
industries, was tasked by MITRE to: identify and define measures that
can be used to quantify and compare caption quality as it relates to
effective communication; propose methods for assessing IP CTS using
these measures; and identify potential criteria for establishing
meaningful thresholds for acceptable caption quality. The working
group's report, completed June 5, 2024, includes six recommendations
for further study to establish metrics:
<bullet> Work with an American National Standards Institute (ANSI)-
certified standards developer to initiate a process to formalize
caption quality standards;
<bullet> Continue to refine measures and metrics as technology
improves, while recognizing that no single measure reflects caption
quality for all users, and that there is a distinction between what is
feasible today and what is needed for full functional equivalence;
<bullet> Adopt a more transparent testing framework, as described
in the report;
<bullet> Use the recommended testing framework to measure caption
accuracy, caption delay, non-speech information, and punctuation and
formatting;
<bullet> Provide more transparency for research plans and results;
and
<bullet> Perform additional research to improve measures, identify
appropriate metrics, and establish thresholds for acceptable caption
quality.
10. By reaching consensus on a number of issues that had been the
subject of dispute among commenters on the Telephone Caption Metrics
[[Page 71850]]
NPRM, published at 86 FR 7681, February 1, 2021, the working group may
have laid the foundation for ultimate adoption of caption quality
metrics. However, it is unnecessary--and would not be appropriate--for
the Commission to defer the adoption of revised compensation formulas
until metrics are in place. The Commission need not resort to metrics
to recognize that the current compensation rate for ASR-only service is
unreasonably high. Continuing to support ASR-only IP CTS at this rate
would be inconsistent with responsible stewardship of the TRS Fund.
11. One commenter's expert suggests that rate-setting should be
delayed because the compliance cost of meeting such metrics are unknown
today. The Commission's exogenous cost recovery criteria provide a
mechanism for recovery of such compliance costs in appropriate
circumstances.
12. In addition, continuing to pay a single rate for IP CTS,
regardless of the captioning mode, inherently encourages providers to
increase or promote even more use of lower-cost ASR-only captioning,
regardless of whether the quality is better or worse than higher-cost
CA-assisted captioning. Adopting bifurcated compensation rates will
mitigate such incentives pending further information about the relative
quality of the two service modes.
13. Reliability of Cost Data. Several commenters argued that the
cost and demand data then available--consisting of historical cost and
demand for 2021 and 2022 and projected cost and demand for 2023 and
2024--were insufficiently reliable to support a revised compensation
plan, and especially the application of different rates to ASR-only and
CA-assisted IP CTS. For example, it was argued that historical cost and
demand data for 2021 and 2022 were unreliable due to the impact of the
COVID-19 pandemic on the demand for IP CTS and that there was
insufficient experience with ASR-only service to enable the Commission
to reliably estimate its cost. However, now that the record has been
updated to include providers' cost and demand reported in February
2024, which includes historical cost and demand for 2022 and 2023 and
projections for 2024 and 2025, these arguments for further delay are
less applicable.
14. The current record also suggests that any pandemic-related
effects on IP CTS demand and cost have almost entirely dissipated. It
now appears that, by mid-2022, IP CTS demand had resumed approximately
its historical trajectory. As to the effects of the pandemic on labor
cost, in the case of IP CTS, the Commission finds no persuasive
evidence of any impact that would render the cost data for 2023 and
2024 unreliable. Unlike the supply of Video Relay Service (VRS) CAs,
which is inherently restricted due to the need for highly trained
American Sign Language interpreters, the supply of CAs of the type
needed by most IP CTS providers appears to be more elastic, and a
lasting labor shortage less likely--especially given the shift to
mostly ASR-only captioning. The record--which shows that historical CA-
assisted costs increased less than 3% from 2022 to 2023--appears to
confirm that any unusual upward trend did not outlast the pandemic.
15. Regarding ASR-only IP CTS, an additional year of cost and
demand data has significantly increased the confidence with which the
Commission can reasonably estimate the average per-minute cost of ASR-
only service. The cost and demand data now available include at least
20 months of historical ASR-only data from every IP CTS provider
offering service prior to January 2024. This is substantially more than
the 12 months of historical data the Commission ordinarily uses in
setting rates. Also, because IP CTS compensation rates are set based on
industry-wide averages, individual cost and demand variations are less
important than they might have been if the Commission had found it
necessary to set rates on a more individualized basis. And as noted
above, delaying the establishment of a separate rate for ASR-only
service will reinforce providers' incentive to decrease reliance on
CAs, even where preferred by the consumer or needed for functionally
equivalent service. By December 2023, ASR-only minutes increased to an
average of 85% of total IP CTS minutes.
16. Additional experience with the ASR-only mode may further
improve the Commission's ability to assess its effect on the cost of IP
CTS. However, by taking account of current data, the compensation
formulas herein will reflect the reasonable costs of each service mode
more accurately than the current formula does. Adopting revised
formulas also will substantially reduce the current waste of TRS Fund
resources (as well as possible incentives for fraud and abuse) and
reduce providers' incentive to inappropriately substitute ASR-only for
CA-assisted service.
17. A commenter's expert consultant states that setting a separate,
lower rate for ASR-only service would discourage innovation in the
provision of automatic forms of IP CTS. However, no evidence is
presented for this claim, and given the very substantial difference in
reported costs for these services, a lower rate can be set for ASR-only
without depriving providers of resources for innovative research and
development.
Proposals for Additional Rate Categories
18. Separate CA-Assisted Rate for CART-Based IP CTS. The Commission
declines to adopt a separate CA-assisted rate for calls that are
captioned using the Communications Access Realtime Translation (CART)
method, as advocated by InnoCaption. The term CART is used in this
context to refer to a captioning method whereby a professional
stenographer produces captions without any assistance from ASR
software. The Commission finds that setting separate rates for the
broad categories of CA-assisted and ASR-only methods of providing IP
CTS is justified by special considerations, as a limited deviation from
the historical practice of applying the same compensation formula to
all methods of providing a particular relay service. However, except
for the conditional rate supplement discussed further below, which is
applicable to any qualifying provider of CA-assisted service, including
providers using the CART method, the Commission is unpersuaded that any
analogous considerations warrant a further subdivision of the CA-
assisted rate.
19. Although the Commission recognizes that the CART method may
have certain benefits, the record at this time does not indicate that
those benefits are so clear as to warrant giving special support for
this approach over other methods of CA-assisted captioning, despite its
acknowledged higher cost. The evidence in the record regarding the
particular advantages of the CART method is from 2020, and with recent
improvements in ASR technology, providers have developed new methods of
using ASR with CA-assisted captioning. Thus, there are now several
variants of CA-assisted captioning being used by IP CTS providers--as
well as variations in the methods used by providers to determine which
service mode should be applied to a call. The process of developing
metrics and measures for IP CTS service quality is not yet complete,
and the current record does not provide definitive evidence as to
whether testing of the methods in use today, using improved
measurements, would indicate a material, qualitative difference between
InnoCaption's performance using the CART method and the performance of
IP CTS providers using other methods of producing CA-assisted captions.
[[Page 71851]]
Further, the efficacy of any particular captioning method is not
determined solely by the technology used, but also by the resources and
skill with which that technology may be implemented by a particular
service provider. Given the statutory mandates for efficiency and
technological neutrality, as well as the absence of definitive
measurements of service quality, the Commission finds insufficient
basis at this time for setting different compensation rates based on
the specifics of each CA-assisted captioning method.
20. Separate ASR-only Rates for Fully Automated and ``Hybrid''
Providers. The Commission also declines to adopt a commenter's
recommendation that two different compensation rates be set for ASR-
only minutes, based on whether the service provider is fully automated,
i.e., does not employ CAs for captioning any calls, or is a hybrid
provider that uses CA-assisted methods for some calls and ASR-only for
others. The commenter also seems to suggest that a provider that uses
CAs for every call should be subject to a different CA-assisted rate
than the CA-assisted rate applicable to providers that do not provide
CA assistance for every call. Currently, no provider uses CAs for every
call; therefore, it is not necessary to address this theoretical
concern on the current record.
21. The concerns noted above regarding deviations from the
Commission's historical practice are also applicable here. In addition,
if the Commission adopted the commenter's suggestion, the vast majority
of ASR-only minutes would be compensated under the rate established for
hybrid providers. For the same reason, an ASR-only rate based on the
average ASR-only cost of the four hybrid providers would be similar to
a cost-based ASR-only rate based on the ASR-only costs of all reporting
providers. While fully automatic providers would receive a much higher
compensation rate for their ASR-only minutes, their higher per-minute
costs are likely attributable primarily to the very low volume of
minutes projected by fully automatic providers, given the economies of
scale that appear to be involved in ASR-only captioning. Therefore, it
is unlikely that differentiating ASR-only rates in this manner would
succeed in accounting for any cost differential that may be inherent in
a provider's choice of whether to use multiple captioning methods.
Classification of Calls
22. As proposed, the CA-assisted compensation formula shall apply
to any call (or any call minutes, if a CA is not present for the entire
call) to which a CA is dedicated, provided that the CA is actively
engaged in the captioning process. The applicability of the CA-assisted
rate will not be affected by the specific nature of the active task(s)
performed by the CA during such assignment (i.e., revoicing, typing the
captions, or monitoring and correcting the output of an automatic
speech recognition program). The Commission concludes that assigning a
CA to monitor and correct any errors in ASR-generated captions
justifies compensation at the CA-assisted rate, provided that the CA is
dedicated to these tasks from the beginning to the end of the call (or
for the entire portion of the call that the provider designates as CA-
assisted). However, the CA-assisted rate shall not apply if the CA is
monitoring more than one call, or is splitting time between monitoring
a call and attending to other tasks, or is only monitoring the
captions, e.g., for research purposes, without actually correcting or
supplementing the ASR-generated captions when necessary. In such a
case, the employee's involvement is more in the nature of general
supervision of ASR-only operations.
23. The Commission is also sensitive to the potential risk that,
given the substantial differential between the ASR-only and CA-assisted
compensation rates adopted herein, an IP CTS provider might have an
incentive to hire additional CAs or steer consumers to CA-assisted
calls even if consumers would not benefit from such a mode of IP CTS.
For example, if such CAs work at home while receiving minimal training
and supervision, the incremental per-minute cost (for a low-cost
provider) of additional CA-assisted minutes might be less than the rate
differential under the Commission's bifurcated compensation plan.
Therefore, the Commission delegates authority to the Consumer and
Governmental Affairs Bureau, in coordination with the Office of the
Managing Director, to work with the TRS Fund administrator to ensure
that annual cost reports include information that will enable the
Commission to determine the reasonableness of IP CTS providers'
practices related to hiring, training, and supervising CAs and to
prevent waste of TRS Fund resources.
24. In addition, the Commission reserves the right to revisit and
revise the compensation formulas for CA-assisted and ASR-only IP CTS
prior to the end of the compensation period, if it concludes that such
intervention is called for to achieve statutory objectives. For
example, if evidence suggests that CAs are being added to calls
primarily to gain the higher compensation rate, without significantly
increasing the accuracy of the captions, then--in addition to taking
other appropriate measures--the Commission may revise the compensation
formulas to correct providers' incentives and mitigate the risk of
waste, fraud, and abuse.
Allowable Costs
25. As proposed in the NPRM, the Commission expands the criteria
for IP CTS cost recovery for research and development (R&D), numbering,
and user access software, harmonizing them with the VRS cost criteria
adopted in 2023. See 88 FR 71994, October 19, 2023 (2023 VRS
Compensation Order). The Commission declines to revisit the
longstanding policy that the TRS Fund does not support the cost of
providing, installing, or maintaining customer premises equipment.
26. Research and Development. The Commission revises its allowable
cost criteria to allow TRS Fund support for the reasonable cost of R&D
to enhance the functional equivalence of IP CTS, including improvements
in service quality that may exceed the Commission's mandatory minimum
TRS standards. As in the case of VRS, the Commission finds that the
current criterion--allowing cost recovery only for R&D conducted to
ensure that a provider's service meets the minimum TRS standards--is
unnecessarily restrictive. Authorizing providers (as well as
Commission-directed entities) to conduct additional research is
consistent with the statutory mandate to encourage the use of improved
technology for TRS and with the Commission's policy of authorizing
multiple IP CTS providers to compete with one another based on service
quality. Such competition logically may lead IP CTS providers to
conduct research and development on innovative methods of producing and
delivering captions, resulting in improved service quality that may
exceed the level required by the minimum TRS standards. The Commission
also finds support for this change in commenters' recent submissions
emphasizing the need to ensure that the compensation plan supports
research and development to improve IP CTS. To establish consistent
allowable-cost criteria for all three forms of IP-based TRS, the
Commission concludes that the expanded allowability of reasonable
research and development costs shall also apply to internet Protocol
Relay Service (IP Relay).
[[Page 71852]]
27. The Commission also sought comment on whether to adopt measures
to prevent waste and ensure that the benefit of the conducted research
and development actually enhances functional equivalence. However, the
Commission also noted that by using an average cost methodology and
setting compensation formulas for multi-year periods, the Commission
can provide substantial incentives for providers to use research and
development funds wisely and avoid incurring unnecessary costs. The
Commission continues to believe that the above incentive structure is a
robust safeguard against waste, and agrees with commenters that
additional safeguards are not necessary at this time. The Commission
stresses that, as with all provider-reported expenses, expenses for
research and development to improve IP CTS are allowable only if
reasonable. In addition, expenses incurred to develop proprietary user
devices and software (or any non-TRS product or service) are not
recoverable from the TRS Fund.
28. Numbering. The Commission treats as allowable the reasonable
costs of acquiring North American Numbering Plan (NANP) telephone
numbers for IP CTS users, in those circumstances where assignment of a
telephone number is necessary to provide the service. In 2008, the
Commission determined that such costs would not be supported by the TRS
Fund, reasoning that they are not attributable to the use of relay
service and that analogous costs incurred by voice service providers
are typically passed through to their customers. Recently, however, the
Commission revisited this issue with respect to IP Relay and VRS,
concluding that the reasonable cost of assigning and porting NANP
numbers for those services should be supported by the TRS Fund.
Recognizing that the Commission's rules require the assignment of NANP
numbers to IP Relay and VRS users and that, based on the current
record, numbering costs are unlikely to be recoverable from users as a
practical matter, the Commission concluded that such costs are now
appropriately attributed to the use of relay to facilitate a call.
29. While the most common IP CTS configuration allows consumers to
use existing telephone numbers to place and receive calls over a
landline voice service, assignment of a new number may be necessary as
a practical matter for some configurations of IP CTS--for example,
where an over-the-top application enables captioning of calls placed
and received on smartphones and other devices. In such instances, the
provider may assign a new NANP number to the user, which is different
from the user's landline or mobile number. The new number may be used,
for example, to enable incoming calls (including 911 callbacks) to be
received via the captioning app on a smartphone, rather than the
phone's native telephony application. In such cases, as is true for VRS
and IP Relay, the IP CTS provider typically does not have a billing
relationship with the consumer, and there seems to be little point in
creating such a relationship for the sole purpose of passing through
what likely would be a de minimis monthly charge for any particular IP
CTS user.
30. Therefore, the Commission revises the allowable-cost criteria
for IP CTS to allow TRS Fund support of an IP CTS provider's reasonable
costs of acquiring NANP telephone numbers when necessary to provide the
service. The Commission stresses that the cost of number assignment is
allowable only where such number assignment is necessary for the
provision of IP CTS in a particular configuration. As noted above, most
IP CTS users receive captioning on a landline phone, in a configuration
that does not require the assignment of a new telephone number. As with
other reported costs, if audits or other review reveals that numbering
costs are being reported in excess of reasonable amounts, the excess
will be disallowed.
31. The Commission also clarifies that, to the extent IP CTS
providers are responsible for delivery of a user's 911 call to the
nearest Public Safety Answering Point (PSAP), the TRS Fund supports
reasonable expenses to connect the 911 call quickly and to
automatically provide location data to the PSAP.
32. Customer Premises Equipment. The Commission's rules do not
prohibit IP CTS providers or their partners from distributing customer
premises equipment (CPE) to IP CTS users. However, the TRS Fund does
not support the provision of CPE to TRS users, except where Congress
has specifically authorized such support. The NPRM did not re-open or
seek comment on this issue. Nonetheless, a number of commenters urge
the Commission to revisit whether the TRS Fund should support the
provision of CPE to IP CTS users. Because this question does not fall
within the scope of the NPRM, it is not necessary for the Commission to
address those comments in this document.
33. Further, even if those comments could be construed as within
the scope of the NPRM, for the reasons articulated in the Commission's
prior orders, commenters provide no persuasive reason to revisit the
issue on its merits. The Commission long ago decided that costs
attributable to equipment that a TRS provider distributes to a
consumer, including installation, maintenance, and testing, are not
compensable from the TRS Fund. The well-established distinction in the
Commission's rules between relay services, which are supported by the
TRS Fund, and end user devices, which are not, is grounded in the text
of the governing statutory provision. As the Commission has explained,
section 225 of the Act focuses on the provision of relay service,
requiring common carriers to provide relay services either directly or
indirectly (e.g., through a TRS Fund-supported provider), and this is
apparent from the plain language of section 225 of the Act, which is
directed at services that carriers must offer in their service areas
that enable communication between persons who use a TTY or other non-
voice terminal device and an individual who does not use such device.
The Commission has further held that costs associated with CPE are not
part of a provider's expenses in making relay services available;
rather they must be incurred by consumers to receive these services,
just as people who do not use relay services must purchase their
phones. The Commission's determinations disallowing CPE costs have been
upheld by federal courts of appeals.
34. Contrary to ClearCaptions' argument, a mere analogy between
section 225 of the Act and certain provisions in section 254 of the
Act, 47 U.S.C. 254, carries no legal weight. TRS support is governed by
section 225 of the Act, not section 254 of the Act, and the Commission
rejects the suggestion that somehow its authority under the former
provision can be expanded based on a purported analogy to how the
Commission has exercised its authority under the latter provision.
35. In addition, even if the Commission had statutory authority to
do so, it is unconvinced that TRS Fund support for provider
distribution of user devices--in particular, purpose-built, proprietary
equipment--would be necessary or appropriate to ensure the availability
of functionally equivalent relay service. Authorizing TRS Fund support
for the kinds of user devices currently offered by providers--i.e.,
relatively expensive, proprietary equipment that can only be used with
one provider's service and that has an unusually short useful life--
appears inconsistent with the Commission's mandate to make TRS
available in the most efficient manner. In the VRS context, the
Commission has adopted
[[Page 71853]]
policies to encourage the use of non-proprietary, off-the-shelf,
screen-equipped devices, such as smartphones, laptops, and personal
computers, to access VRS. In general, the use of non-proprietary
devices for TRS (e.g., by downloading software applications developed
by providers) has several advantages. First, it is less costly, as most
people in the United States already own such devices and use them for a
wide variety of purposes other than TRS. Second, the use of non-
proprietary devices avoids ``locking in'' users to the service of a
single TRS provider, which limits consumer choice and which also can
encourage the offering of free devices as an inducement to use a
particular provider's relay service. Third, the use of non-proprietary
devices avoids ``siloing'' TRS users in ways that can hinder access to
communication technologies available to mainstream users.
36. The record is clear that IP CTS can be accessed without
proprietary equipment, by downloading providers' software applications
to smartphones, tablets, and laptops. For example, many providers make
their applications available on Google Play and the Apple App Store.
Although a commenter argues that such applications are generally
impractical for seniors (who comprise the bulk of IP CTS users), a
survey indicates that smartphone ownership is growing faster among
seniors than other age groups, and that as of 2021, 61% of seniors
owned smartphones--a percentage that presumably will continue to
increase. In addition, reasonable expenses incurred in helping seniors
download and use a provider's smartphone application are allowable
costs supported by the TRS Fund. Finally, even for those consumers who
are unable to use smartphone or other software applications to access
IP CTS, it appears that screen-equipped wireline telephones, usable for
captioned phone calls (or screens that can be connected to a wireline
telephone) are commercially available for home use.
37. User Access Software. The Commission adopts its proposal to
allow TRS Fund support for the reasonable cost of developing,
maintaining, and providing software and web-based applications that
enable users to access IP CTS from off-the-shelf user devices, such as
mobile phones, desktop computers, and laptops running on widely
available operating systems. This change harmonizes the cost criteria
for IP CTS with those adopted for VRS. As with VRS, such costs must be
incurred by an IP CTS provider to enable users to connect to its
service platform; therefore, they are attributable to the provision of
IP CTS. Further, recovery of such costs is consistent with the
efficiency mandate, as it supports the use of off-the-shelf IP-enabled
user devices to access TRS and decreases consumers' dependence on TRS
equipment specifically designed for connection to a particular TRS
provider.
38. Consistent with its compensation ruling for VRS, the Commission
declines to allow TRS Fund support for the cost of user access software
needed for proprietary user equipment supplied by the provider or a
third party. While TRS users need a software interface to access TRS,
they do not need proprietary devices that can be connected to and used
with only one provider's service, nor do they need software designed
for such devices. Although the Commission does not prohibit providers
from distributing such devices and software to consumers requesting
them, it is not necessary to support proprietary devices and software
with TRS Fund resources. Further, allowing recovery of such software
costs would not advance the Commission's policy to enable users to
access TRS from off-the-shelf IP-enabled devices and to avoid
dependence on TRS equipment specifically designed for a particular
provider's network. If an IP CTS provider supplies user access software
for both off-the-shelf and proprietary devices, and the development
costs for each type of software cannot be directly assigned, a provider
may adopt a reasonable allocation method to separate such costs, to
ensure that it does not seek recovery for costs associated with
proprietary devices. The provider shall specify the method used in its
cost reports, so that it can be evaluated by the TRS Fund administrator
and the Commission.
39. Field Staff Visits. While the Commission did not seek comment
on the issue of whether providers should be able to recover the costs
associated with deploying their field staff, the Commission's ruling in
the 2023 VRS Compensation Order sufficiently addresses the issues
raised in the comments regarding the treatment of costs incurred by IP
CTS providers' field staff. In the 2023 VRS Compensation Order, the
Commission reaffirmed that, because the costs of installing,
maintaining, and training customers to use provider-distributed devices
(or software for proprietary provider-distributed devices) are not
recoverable through TRS Fund compensation, expenses for field staff
visits for such purposes are not allowable expenses for VRS or IP CTS.
In addition, the Commission clarified that the reasonable cost of
service-related work performed by field staff during a visit to a new
or current user (e.g., to assist customers with registration, use of
the service on a non-proprietary device, or completing a port) is an
allowable cost of providing VRS or IP CTS.
Determination of Cost-Based Rates
40. Cost Averaging. The Commission has broad discretion in choosing
compensation methodologies and setting compensation rates within the
parameters established by section 225 of the Act. To set cost-based
benchmarks for IP CTS compensation rates, the Commission continues to
rely on the methodology used in the 2020 IP CTS Compensation Order, in
which rates were set based on the weighted average of each provider's
projected and historical costs for the current and immediately
preceding calendar years (now 2023 and 2024). Under this weighted-
average method, the allowable expenses reported by all CA-based and
ASR-based IP CTS providers respectively for calendar years 2023
(historical expense) and 2024 (projected expenses) are totaled and the
allowed operating margin (determined as a percentage of expenses) is
added to total allowable expenses. The resulting total is divided by
total historical (for 2023) and projected (2024) compensable minutes of
demand for CA-based and ASR-based IP CTS respectively for those two
calendar years, to yield an average cost per minute (including
operating margin). This average cost per minute is called a
``weighted'' average because it gives more weight to the per-minute
cost incurred by providers with relatively high demand and less weight
to the per-minute cost incurred by providers with relatively low
demand.
41. The Commission maintains this approach for essentially the same
reasons cited in the 2020 IP CTS Compensation Order. First, this
methodology has produced consistent and reliable results without
imposing undue administrative burdens on either IP CTS providers or the
Commission. Second, average-cost-based compensation, especially when
applied for more than one year, provides substantial incentives and
opportunities for individual TRS providers to increase their efficiency
and capture the resulting profits. Third, maintaining a consistent
compensation methodology provides a measure of transitional stability
at a time of technological change.
42. According to Hamilton Relay's expert, the Brattle Group,
averaging is inappropriate for IP CTS because ``IP
[[Page 71854]]
CTS costs do not appear to follow a normal distribution, which
typically would mean a few providers with very high costs, a few
providers with low costs, and a majority of providers with costs
somewhere in the middle of a bell curve.'' However, the Brattle Group
cites no authority for the claim that cost-averaging is only
appropriate when provider costs are in a bell-curve shaped
distribution--which is unlikely to occur where, as here, the sample
size is limited to nine providers, five of which are very small or
start-ups. The Commission is also unpersuaded that there is
justification for replacing the average-cost approach with a ``mean
plus one standard deviation'' approach, as advocated by Hamilton Relay.
Setting a CA-assisted rate based on this approach would overcompensate
providers with average costs and substantially dilute the incentive for
higher-cost providers to become more efficient.
43. Tiered or Small-Provider Rates. CaptionMate urges the
Commission to adopt a tiered rate structure for IP CTS, or
alternatively a separate rate for small providers, contending that
supporting smaller providers with relatively high per-minute costs
would offer consumers more choice and promote innovation. The
Commission adopted tiered rates for VRS due to a combination of
specific circumstances that were threatening the viability of
competition among VRS providers. In 2020, the Commission declined to
adopt tiered rates for IP CTS because it was not persuaded that similar
or equally compelling factors are present in the IP CTS market to an
extent that would justify introducing the complexities and potential
inefficiencies of a tiered rate structure or an emergent provider rate.
This remains the case today.
44. First, unlike in VRS, the IP CTS market has not been dominated
for a long period by a single provider. The market share of the largest
IP CTS provider is not comparable to that of the largest provider in
the VRS market. Second, while there are economies of scale in IP CTS,
there is little evidence that such economies of scale are preventing
the emergence of efficient competitors. IP CTS's record of growth
suggests that there are substantially greater opportunities than in the
VRS context for a provider to reach efficient scale within a relatively
short period of time. Where higher costs are incurred by a relatively
large IP CTS provider, it is more likely attributable to business
decisions concerning use of contractors as turnkey service providers,
prior investments in technology and business processes, and differences
in business models, rather than issues of scale. Third, unlike VRS, IP
CTS is not dependent on interoperability and does not have other
network effects that make it difficult for new entities to enter the
market or obtain eligible IP CTS users as customers. Fourth, the
relatively recent introduction of ASR-only IP CTS, as well as new
methods of providing CA-assisted IP CTS, provides additional evidence
that Commission policies are not deterring innovation in this arena.
Fifth, the four recently granted applications for IP CTS certification
indicate that new entrants believe that additional competitors can
succeed and innovate in the provision of IP CTS. In summary, given the
relative ease of new entry and the presence of vigorous competition
based on service quality, the Commission concludes that the goals of
offering consumer choice and encouraging innovation can continue to be
achieved without resorting to the ratemaking challenges, complexities,
and potential inefficiencies of a tiered rate structure or a separate
small-provider rate.
45. The Commission also notes that none of the IP CTS providers
advocating a special small-provider rate offers CA-assisted service. In
a recently filed petition, advocates for accessibility contend that the
TRS Fund should not support the provision of IP CTS by providers that
do not allow users to select CA-assisted service. While the Commission
does not prejudge this petition, the fact that none of the providers
subject to the proposed small-provider rate offers a CA-assisted option
reinforces its conclusion that the objectives of section 225 of the Act
would not be served by adopting such a rate.
46. The Commission also emphasizes that it is mandated to make TRS
available in the most efficient manner, not to ensure that every TRS
provider is able to operate successfully, regardless of the cost. A
small provider claims that it offers a service of unique value,
targeting a younger demographic and offering captioning in 67
languages. However, the Commission must balance the potential benefits
of diverse service offerings with the need for efficiency. To the
extent that there is significant demand for multiple-language
captioning, the record does not show that it cannot be made available
by a provider supported by the TRS Fund at the rates set herein, or
through other channels. Also, the compensation plan adopted herein,
which limits the cumulative reduction in the ASR-only compensation rate
during the five-year compensation period, allows all providers of ASR-
only service to be compensated at a level higher than the current
average cost. Thus, small ASR-only providers will also be afforded a
period of stability to support their growth under relatively favorable
conditions.
Estimating IP CTS Expenses
47. Attribution of Expenses to Service Categories. The Commission
adopts the NPRM's tentative conclusion that, when possible, providers
must directly assign costs to either ASR-only or CA-assisted IP CTS,
and when that is not possible, they must reasonably allocate such costs
based on direct analysis of the origin of the costs. Where they could
not directly attribute costs to one or another service, most providers
have allocated joint expenses based on the share of their IP CTS
minutes that are ASR-only or CA-assisted. The Commission finds this to
be a reasonable method.
48. Relevant Cost Data. Since 2018, the Commission has established
the cost basis for IP CTS provider compensation by averaging providers'
reported historical expenses for the prior calendar year (here, 2023)
with their projected expenses for the current calendar year (here,
2024). The Commission has found this method to be a useful way to
counteract providers' tendency to overestimate future costs. The
Commission finds no compelling reason for any substantial modification
of this approach. IP CTS providers' cost projections in the record do
not include such dramatic variations as were raised by VRS provider
projections in the recently concluded VRS compensation proceeding.
49. Adjustment Factor. To ensure that compensation for CA-assisted
service in the first year of the next period is sufficient to cover
likely inflation-related cost increases (offset by productivity related
decreases) between Fund Years 2023-24 and 2024-25, the Commission
adjusts each provider's average allowable expenses for calendar years
2023 and 2024 by 3.77%, which is the change from fourth quarter 2022 to
fourth quarter 2023 in the Bureau of Labor Statistics (BLS) index of
seasonally adjusted ``total compensation for private industry workers
in professional, scientific, and technical services.'' This adjustment
uses the same index that will be used to adjust compensation for CA-
assisted IP CTS in subsequent years of the compensation period. The
Commission does not apply an adjustment factor to ASR-only service. As
explained below, an adjustment factor for ASR-only cost is not needed
for this compensation period.
[[Page 71855]]
50. Newly Allowable Cost Categories. Although the Commission
revises several allowable-cost categories, the record does not indicate
that these changes will result in any significant increase in the
estimated cost of service. Previously non-allowable expenses reported
for numbering activities are identified by each IP CTS provider in its
annual cost report. However, because most IP CTS users do not require
the assignment of numbers, average per-minute expenses reported for
number assignment are less than $.001 per minute, resulting in only a
trivial cost adjustment. In the other categories of previously non-
allowable costs, only one provider reported relevant non-allowable
expenses for 2023 and 2024, and that provider has stated it was not
able to segregate proprietary from non-proprietary software costs, or
research and development for proprietary equipment from research and
development for relay service. As a result, even this provider did not
report any expenses in newly allowable cost categories other than
number assignment. Therefore, the changes in allowable cost categories
do not result in any adjustment of estimated average allowable per-
minute expenses for either CA-assisted or ASR-only IP CTS. For the
reasons stated above, costs for customer support provided by field
staff remain non-allowable to the extent that they are attributable to
installation, maintenance, or customer assistance with provider-
distributed devices or software for proprietary devices.
51. Technology Cost. Some commenters argue that the Commission
should adjust allowable expenses to take account of an asserted need
for increases in technology investment, beyond the amounts estimated in
annual cost reports. Given the excess in average TRS Fund payments
above reasonable cost for the last several years, the Commission finds
it implausible that IP CTS providers have been unable to spend
reasonably necessary amounts in technology-related cost categories
(engineering and research and development). Due to the extraordinarily
high average operating margins recently achieved by IP CTS providers,
ample resources have been available to enable providers to purchase any
technology they may need or develop it in-house. In 2021, IP CTS
providers reported average expenses of approximately $0.93 per minute
and were paid approximately $1.36 per minute from the TRS Fund ($1.42
in January-June and $1.30 in July-December), for an operating margin of
46.2%. In 2022, they reported average expenses of approximately $0.83
per minute and were paid $1.30, for an operating margin of 56.9%. In
2023, they reported average expenses of approximately $0.72 per minute
and were paid $1.30, for an operating margin of 80.6%. Further, the
proliferation of ASR technology in other areas, including captioning
for video conferencing and television, is likely to ensure that ASR
development costs need not be borne by IP CTS providers alone. As noted
above, providers have not reported incurring any additional research
and development expenses for 2023 and 2024 in the newly allowable
category of expenses for research and development to improve IP CTS
beyond what is necessary to meet minimum TRS standards. Therefore, the
Commission is not persuaded that extraordinary levels of additional
support from the TRS Fund will be needed to assist IP CTS providers in
securing necessary technology. In addition, the compensation plan
limits the cumulative reduction in the ASR-only compensation rate
during the next compensation period, providing an above-cost
``cushion'' as a safeguard against any unpredicted increases in
technology-related cost.
52. CA Cost. Some commenters argue that the current compensation
rate is insufficient to support a wage rate for CAs at the level they
assert is needed--specifically, the federal contractor minimum. In
contrast with the VRS compensation proceeding, the record here does not
show that there is a continuing shortage of people qualified to work as
IP CTS CAs. Indeed, the recent substantial decline in CA-assisted IP
CTS minutes suggests the opposite. On the other hand, the Commission
agrees that the quality of CA-assisted service likely will benefit if
CAs are paid at higher hourly rates. To this end, the Commission
prescribes two rates for CA-assisted service: a base rate, determined
using the established average cost methodology; and a supplemental
rate, applicable to the minutes handled by those CAs whose hourly wages
exceed a threshold amount.
53. Marketing and Outreach Cost. Some commenters contend that the
Commission should set rates that provide an additional incentive to
engage in marketing and outreach, e.g., to ensure the IP CTS industry
invests in growth by reaching and offering the service to more
qualifying consumers. They claim that only a small fraction of
consumers who would benefit from IP CTS are being served. ClearCaptions
blames declining compensation rates for causing a reduction in
marketing expenditures by providers. According to providers' cost
reports, however, marketing expenditures have increased substantially
since 2020, both in dollars per minute and as a percentage of total
allowable expenses. IP CTS providers reported spending an average of
$.0903 per minute, or 13.0% of total expenses, on marketing in 2023,
and projected spending $.1114 per minute, in 2024, or 15.0% of total
expenses, in 2024. These percentages are far higher than in any recent
year--and will continue to be supported at that level by the rates set
in the Report and Order. Given the significant increase in marketing
expenditures, the cost data do not suggest a need to provide additional
monetary incentives for providers to find new IP CTS customers.
54. The Commission also does not find it credible that, despite the
extraordinarily large operating margins (far above the allowed 10%
level) actually earned by providers at the current rate, IP CTS
providers have been unable to spend what is needed to market the
service to likely customers. Nor does the Commission find it credible
that IP CTS providers cannot continue to do so as rates are reduced to
allow more reasonable operating margins. In this regard, despite some
commenters' claims, the number of people in the United States who could
benefit from IP CTS is largely a matter of speculation. While
ClearCaptions suggests that the estimated 12.8 million U.S. residents
with moderate to profound hearing loss are all ``potential IP CTS
customers,'' many individuals who use hearing aids do not need the
additional assistance of IP CTS. There are a variety of other sources
of communications assistance available to this population, including
hearing-aid compatible telephones and mobile phones, specialized high-
amplification phones, and increasingly, commercially available ASR-
enabled telephones and services. In addition, many seniors with
moderate to profound hearing loss may be precluded from benefitting
from a captioning service due to vision-related or cognitive
disabilities. The Commission is setting TRS Fund support at a level
that should encourage reasonable efforts to promote IP CTS among people
who can benefit from it, but there is no evidence to support the
assumption that everyone with at least moderate hearing loss needs,
wants, and is able to use the service.
Operating Margin
55. The Commission adopts the proposal in the NPRM to maintain the
previously established reasonable range of operating margins (7.6%-
12.35%),
[[Page 71856]]
and the Commission sets the operating margin for the next period at
10%, the same level set by the Commission in the 2020 IP CTS
Compensation Order. In the NPRM, the lower bound of this range was
incorrectly stated as 7.75%. The Commission finds no reason to change
the operating margin from the previously allowed level. In particular,
the record does not support arguments that the allowed 10% operating
margin is insufficient to encourage capital investment in IP CTS.
56. The current range of reasonable operating margins for IP CTS is
based on an average of the margins earned in analogous industries,
including government contracting and the professional service sector
that includes translation and interpretation services, as well as
information technology consulting. For CA-assisted IP CTS, like VRS,
labor costs continue to comprise a large percentage of total costs.
Therefore, the Commission finds that the current range of operating
margins is appropriate for the same reasons cited in the 2023 VRS
Compensation Order. ASR-based IP CTS, by contrast, is not labor
intensive, as the CAs are replaced by ASR software. Nonetheless, the
Commission finds that the current reasonable range, with the
approximate midpoint at 10%, remains appropriate for ASR-based IP CTS.
57. ASR-based IP CTS does not depend on labor to generate captions.
In addition to saving on labor costs, it requires even less physical
plant than CA-assisted IP CTS, thus saving on capital costs as well.
Nor is it a very high-risk business. Apart from the spike in demand
during the COVID-19 pandemic, demand for IP CTS has shown steady growth
since 2015. Further, while other businesses may face price fluctuations
based on, for example, changing demand and the pricing decisions of
competitors, IP CTS providers can rely on government-established prices
that are predetermined for a period of several years.
58. ClearCaptions' expert, FTI Consulting (FTI), does not provide a
convincing explanation of its view that average margins for the
competitive telecommunications firms, or for a mix of firms in the
communications and information technologies sector, would provide a
more appropriate benchmark. As a preliminary matter, the Commission
notes that FTI's initial study of the margins earned by allegedly
comparable firms included telecommunications carriers. As explained in
prior Commission orders, the operating margin approach was adopted
because the Commission recognized that TRS providers are unlike the
telecommunications industry, in that TRS is not a capital-intensive
business. Any proposed benchmark that includes the operating margins of
telecommunications carriers clearly would not be appropriate for IP
CTS.
59. While the most recent analysis submitted by FTI does purport to
filter out capital-intensive companies from the sample of information
and communications technology firms, the use of a benchmark based on
the high technology sector remains flawed, for several reasons. First,
while ASR-only IP CTS relies on technology, technology costs do not
loom large in the providers' cost profiles. Rather, the biggest expense
categories in IP CTS providers' cost reports are subcontractor
expenses, marketing, and operations support. Engineering expenses--even
when combined with R&D--come fourth. Second, the FTI analysis looks at
a sample of companies with net profit of up to 100%. The Commission is
not persuaded that the companies from the sample are comparable to TRS
providers. Third, IT companies typically involve high risk, while the
degree of risk faced by IP CTS providers is limited.
60. The Commission does not see a reason why ASR-only IP CTS would
have a higher risk level than CA-assisted IP CTS and therefore warrant
a higher operating margin. While CA-assisted IP CTS faces some labor
market risk, ASR-only IP CTS does not. Both services share a stable
demographic from which to draw customers, and predictable support
levels. Based on these factors, the Commission finds that it is
appropriate for ASR-only IP CTS to have the same reasonable range of
operating margins as CA-assisted IP CTS.
Compensation Period and Rates
61. Compensation Period. The Commission adopts a compensation
period that begins the first month after the effective date of this
Final Rule and ends June 30, 2029--approximately a five-year period.
The Commission concludes that this period is long enough to give
providers some degree of certainty regarding the applicable
compensation levels and an incentive to improve efficiency, but also
short enough to allow timely reassessment of the compensation formulas
in response to potential unanticipated cost changes and other
significant developments. There is substantial support in the record
for adopting this time frame.
62. ASR-only Rate. For ASR-only service, the Commission estimates
average cost as follows. First, the Commission totals all providers'
reported allowable expenses for 2023 and 2024, respectively (including
newly allowable costs that were reported). Next, the Commission divides
these results by 2023 and 2024 minutes, to yield average expenses per
minute. Then the Commission averages the per-minute rates for 2023
($0.61) and 2024 ($0.65) to get a blended average of expenses per
minute for 2023-24 ($0.63). Finally, the Commission adds a 10%
operating margin, for an average per-minute cost of $0.69.
63. Glide Path for ASR-Only Rate. The average per-minute cost
(including operating margin) for ASR-only IP CTS for 2023-24 is $0.69.
To fulfill the Commission's role as steward of the TRS Fund, it is
important to set a course toward a rate reduction. However, the
Commission is concerned that an immediate 47% rate reduction could
disrupt the provision of both methods of IP CTS by forcing less
efficient providers to immediately adjust their spending to reflect
reduced revenue. Further, while the Commission has found the current
cost and demand data sufficiently reliable to justify setting a
separate ASR-only rate, future cost developments for this service mode
are not easy to predict, and the bifurcation of the rate itself may
cause some cost changes over time. Therefore, the Commission adopts a
variant of the ``glide path'' approach similar to that used in prior
TRS compensation proceedings.
64. Under this approach, the ASR-only rate will be reduced by
approximately 10% annually for the first three years of the period. The
initial ASR-only rate, applicable from the effective date through June
30, 2025, will be $1.17; the second-year rate, applicable from July 1,
2025, through June 30, 2026, will be $1.05; the third-year rate,
applicable from July 1, 2026, through June 30, 2027, will be $0.95. For
the fourth and fifth years, through June 30, 2029, the ASR-only
compensation rate will remain at $0.95.
65. As discussed above, the cost and demand data now available on
ASR-only service, which includes at least 20 months of historical data
(as well as 24 months of projected cost data) from every mature IP CTS
provider, has significantly increased the Commission's confidence that
the average per-minute cost of ASR-only service is substantially below
the cost of CA-assisted service. But the Commission acknowledges that
ASR is a nascent service, that ASR-only cost patterns may change over
time in unpredicted ways, and that there is room for improvement in the
quality of ASR-only service, which could entail
[[Page 71857]]
increased cost. To the extent that providers compete to provide a
superior quality of service, such costs may be incurred regardless of
whether the Commission establishes and enforces quality-of-service
metrics. By limiting the cumulative reduction of the ASR-only
compensation rate during this period, the Commission is able to leave
the issue of quantifying such costs to be addressed in the future,
based on actual provider cost reports, should that be necessary. At the
end of the five-year rate cycle established in the Order, the
Commission will be able to assess additional years of ASR-only cost
data and adjust costs as necessary at that time.
66. The Commission concludes that this approach provides a
sufficient safeguard against the possibility of unexpected increases in
ASR-only IP CTS costs during the compensation period, including any
plausible need for additional investment in R&D and technology. In
effect, this approach establishes a $0.95 ``floor'' on the compensation
rate for ASR-only service for the duration of the compensation period,
rather than the $1.00 or $0.99 ``floor'' advocated by some commenters.
Although advocates for a somewhat higher ``floor'' contend that their
preferred level is necessary to ensure sufficient support for specified
(but unreported) levels of marketing and technology expenses, as well
as non-allowable CPE-related costs, the Commission rejects these
arguments for the various reasons discussed above. In any event, the
Commission is not precluded from revisiting the compensation plan prior
to its expiration, should that be deemed necessary.
67. A commenter also contends that the floor it advocates is needed
to ensure that the per-minute dollar amount of operating margin earned
by a provider from ASR-only service is not lower than the dollar amount
of operating margin earned from CA-assisted service. While the
Commission does not necessarily agree with the premise of this argument
(that provider incentives are based on the per-minute dollar amount of
operating margin rather than the percentage of underlying cost that it
represents), it is unnecessary to decide this question. A $0.95 rate
for ASR-only service still provides a substantial cushion above
allowable per-minute expenses, rendering it highly unlikely that the
average dollar amount of ASR-only operating margin will fall below the
average dollar amount of CA-assisted operating margin.
68. CA-Assisted Rate. For CA-assisted service, the Commission
establishes a base compensation rate by applying the methodology
discussed above. This is a ``base'' rate because it is subject to
annual adjustment. The Commission totals all providers' reported
allowable expenses for 2023 and 2024 (including newly allowable costs
that were reported), and then adjusts the totals for inflation. Next,
the Commission divides the results by 2023 and 2024 minutes, to yield
average expenses per minute. Then the Commission averages the per-
minute rates for 2023 ($1.08) and 2024 ($1.37) to get a blended average
of expenses per minute for 2023-24 ($1.23). Finally, the Commission
adds a 10% operating margin to arrive at a base rate. This rate for CA-
assisted IP CTS is $1.35, $0.05 higher than the current rate and will
apply in the first year of the new compensation period, Fund Year 2024-
25.
69. Alternative CA-Assisted Rate Proposals. The Commission declines
to adopt the alternative CA-assisted rates recommended by ClearCaptions
($1.58 per minute), CaptionCall ($1.67 per minute), and Hamilton ($1.78
per minute). The rates recommended by ClearCaptions and CaptionCall are
based on their requests that the Commission revisit its longstanding
policy disallowing TRS Fund support for the cost of provider-
distributed CPE, increase support for CA wages, technology costs, and
outreach/marketing beyond cost-based levels, and increase the allowed
operating margin to the 16-21% range. For the reasons stated above, the
Commission declines most of these requests. However, support for CA
wages is addressed through a conditional rate supplement, discussed
below. Hamilton's recommended $1.78 rate is based on its recommendation
to use a ``mean plus one standard deviation'' approach in lieu of
average cost, which the Commission declines to adopt for the reasons
stated earlier.
70. Conditional Supplement to the CA-Assisted Rate. The Commission
seeks to ensure that IP CTS providers have the ability to provide a
high quality of CA-assisted service. The record reflects that some IP
CTS CAs are currently paid below the federal contractor minimum wage
(currently $17.20 per hour). There is likely a correlation between the
quality of CA-assisted service and the amount of compensation that CAs
receive. Therefore, the Commission seeks to ensure that providers are
able, if they choose, to pay CA wages at least equal to the federal
contractor minimum. To this end, the Commission establishes a
supplemental rate for CA-assisted service, applicable to any of the
four providers currently certified to provide CA-assisted service
(CaptionCall, ClearCaptions, Hamilton, and InnoCaption), for those
minutes of service for which the CAs producing captions were paid a
minimum hourly rate, initially set at $17.20. If the Commission were to
set a generally applicable compensation rate for CA-assisted service
based on the assumption that, going forward, all IP CTS providers would
pay that minimum, the Commission would have no assurance that reality
will match that assumption. Especially in the absence of a labor
shortage comparable to that affecting VRS providers, the Commission has
less confidence that labor market factors will induce IP CTS providers
to pay higher wages to CAs. The Commission concludes that, in these
circumstances, payment of a higher rate for CA service meeting the
stated condition will produce service-quality improvements that are
approximately commensurate with the higher cost to the TRS Fund, and
therefore will not significantly affect the efficiency with which IP
CTS is provided.
71. The record contains limited information on the CA wages
currently paid by IP CTS providers and their subcontractors. However,
the Commission estimates that if CA wages averaged $17.20 per hour in
2023-24, the average cost of CA service (including a 10% operating
margin) would rise by approximately $0.21. To ensure reasonable
compensation for providers of CA-assisted service that raise CA wages
to this threshold, the Commission adopts a rate supplement of $0.21 per
minute, initially applicable to those minutes for which the CA
producing captions is paid at least $17.20 per hour. The threshold
amount of $17.20 per hour will be adjusted in the second and third
years of the compensation period by the same factor applicable to the
rates for CA-assisted service.
72. The Commission directs the TRS Fund administrator to issue
instructions to the four providers of CA-assisted service defining the
method and format by which wage information should be submitted for any
CA as to which a provider claims application of the rate supplement.
The Commission delegates authority to the Consumer and Governmental
Affairs Bureau and the Office of the Managing Director to review and
approve such instructions.
73. To prevent waste, fraud, and abuse of the TRS Fund, the rule
expressly provides that the initial
[[Page 71858]]
payment of this compensation supplement is a preliminary payment,
conditional on subsequent verification by audit that the CAs producing
captions for minutes for which the supplement was paid actually were
paid the hourly rate claimed by the provider. In this regard, any of
the four IP CTS providers certified for CA-assisted service may request
application of the rate supplement to minutes for which captioning was
provided by a subcontractor. However, the provider is responsible for
ensuring and documenting the accuracy of its representations to the TRS
Fund administrator regarding the wages paid to the subcontractor's CAs.
Further, a subcontractor's CA wages are equally subject to subsequent
verification and audit. In such subsequent audit, if an IP CTS provider
fails to produce documentation, satisfactory to the TRS Fund
administrator, verifying the hourly rate paid to affected CAs--whether
employed by the provider or a subcontractor--then the administrator is
entitled to immediately reclaim any prior payments of the rate
supplement for minutes handled by such CAs, by offsetting such prior
payments against any amounts claimed in the provider's next monthly
compensation request.
74. When the Revised Rates Apply. To ensure that no party is
adversely affected by the timing of the Report and Order, the new rates
will not be applicable until the first day of the first month that
begins after the effective date of the Report and Order. Therefore, the
Commission directs the TRS Fund administrator to continue compensating
providers of IP CTS under the current compensation formula of $1.30 per
minute for all service provided through the last day of the calendar
month that immediately precedes the effective date of the Report and
Order. Service provided on or after November 1, 2024, shall be paid in
accordance with the formulas adopted in Report and Order.
Annual Adjustment of Formulas
75. For CA-assisted IP CTS, as a price indexing formula to be
applied during the compensation period to reflect inflation and
productivity, the Commission adopts its proposal to use the Bureau of
Labor Statistics' Employment Cost Index for ``professional, scientific,
and technical services'' (ECI-PST)--the same index used to annually
adjust compensation for VRS and IP Relay, on the basis that this
seasonally adjusted index, which includes translation and interpreting
services. This approach is consistent with the index currently used to
adjust the compensation formulas for VRS and IP Relay. As with IP Relay
and VRS, labor is the largest expense incurred to provide CA-assisted
IP CTS and the most likely to cause a cost increase over time. And as
with VRS and IP Relay, the ECI-PST index tracks an industry sector
similar to CA-assisted IP CTS. The Commission assumes that this index
reasonably captures relevant productivity enhancements as well, and
that accordingly, it is not necessary to set a separate productivity
factor at this time.
76. For ASR-only IP CTS, the Commission concludes it is unnecessary
to adopt an adjustment factor at this time. It is possible that a
technology-based service of this kind may exhibit productivity
enhancements over time, which may more than offset the general
inflation rate. However, technology cost is only one component--and not
the largest component--of the cost of ASR-only service. After five
years of additional experience with ASR-only service, the Commission
will be better positioned to adopt an appropriate adjustment factor. In
the interim, the Commission concludes that an adjustment factor is not
needed, as a 10% annual reduction in the ASR-only rate will leave this
rate substantially above average 2023-24 cost through the end of the
compensation period.
77. As proposed in the NPRM, the compensation rule also provides
for annual review and adjustment of any claims for exogenous cost
recovery, in accordance with the criteria adopted in 2020.
Final Regulatory Flexibility Analysis
78. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), the Commission incorporated an Initial Regulatory
Flexibility Analysis (IRFA) in the. The Commission sought written
public comment on the proposals in the NPRM, including comment on the
IRFA. No comments were filed addressing the IRFA.
79. Need for, and Objectives of, Report and Order. In the Report
and Order, pursuant to 47 U.S.C. 225, the Commission adopts multi-year
compensation plans for IP CTS. To provide the appropriate compensation
for the provision of, and continued availability of IP CTS, the
Commission adopts separate compensation levels for IP CTS using only
automatic speech recognition technology (ASR-only IP CTS) and IP CTS
provided with communications assistants (CA-assisted IP CTS).
Establishing two compensation formulas gives the Commission the ability
to encourage the provision of both ASR-only IP CTS and CA-assisted IP
CTS, while limiting the burden to the TRS Fund. For ASR-only IP CTS,
the Commission adopts a compensation plan that reduces the ASR-only
rate in stages, giving the Commission an opportunity to reassess the
reasonable cost of ASR-only IP CTS, in light of future developments,
before the rate actually reaches the cost-based level indicated by
current cost data. For CA-assisted IP CTS, the Commission adopts a
compensation plan that addresses cost changes due to inflation. The
Commission also updates the reasonable cost criteria to improve the
ability of IP CTS providers to provide and receive compensation for IP
CTS, whether provided as ASR-only IP CTS or CA-assisted IP CTS. The
Commission takes these steps to ensure the provision of IP CTS in a
functionally equivalent manner to persons who are deaf, hard of
hearing, DeafBlind, or have speech disabilities.
80. Description and Estimate of the Number of Small Entities to
Which the Rules Will Apply. The policies adopted in the Report and
Order will affect obligations of IP CTS providers. Neither the
Commission nor the SBA has developed a small business size standard
specifically for TRS providers. All Other Telecommunications is the
closest industry with an SBA small business size standard.
81. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements for Small Entities. The provider compensation
plan adopted in the Report and Order clarifies certain existing
reporting, recordkeeping, and other compliance requirements for small
entities. The adopted rules establish the compensation structure for IP
CTS providers which may impose additional costs for small providers.
The Commission retains the status quo of continuing to require IP CTS
providers, including small providers, to file annual cost and demand
data reports with the TRS Fund administrator. The Commission clarifies
the data related to engineering, research and development, and
communications assistant costs that shall be collected in the
providers' annual cost and demand data filing. While there are no new
or additional burdens on IP CTS providers to file these reports, small
entities may need to hire professionals to complete cost reports with
new formulas and calculations such as the glidepath approach for the
ASR-only formula for example, so that they may comply with the adopted
rules. These calculations and reports must also be adjusted to include
certain expenses that were previously not allowable, such as for
research and development to enhance
[[Page 71859]]
functional equivalence of IP CTS; the costs of acquiring NANP telephone
numbers; and the reasonable costs of developing, maintaining, and
providing software and web-based applications that enable users to
access IP CTS from off-the-shelf user devices running on widely
available operating systems. Although the Commission allows IP CTS
providers to recover reasonable costs for numbering, certain software,
and certain research and development costs, these allowances do not
change the cost categories reported by providers. When it is possible
to directly assign costs to either ASR-only or CA-assisted IP CTS,
providers must do so, and when that is not possible, they must
reasonably allocate such costs based on direct analysis of the origin
of the costs themselves.
82. Steps Taken To Minimize the Significant Economic Impact on
Small Entities, and Significant Alternatives Considered. The adopted
compensation structure and levels will apply only to entities which
are, or may become, certified by the Commission to offer ASR-only IP
CTS or CA-assisted IP CTS in accordance with the Commission's rules.
The Commission adopted these multi-year compensation levels to
compensate providers for their reasonable cost of providing service, to
reduce the burden on TRS Fund contributors and their subscribers, and
to ensure that TRS is made available to the greatest extent possible
and in the most efficient manner. Among the steps taken to minimize
significant impact on small and other entities is the adoption of
separate compensation structures for ASR-only IP CTS and CA-assisted IP
CTS based on their reported costs. The compensation for ASR-only IP CTS
will be adjusted over a multi-year glide path. The CA-assisted rate
will be subject to adjustment based on a factor that reasonably
predicts whether relevant costs will rise or fall in the coming years.
The compensation period will be effective for approximately five years,
which is longer than the three-year alternative proposed in the NPRM,
providing an incentive to improve efficiency and reassess formulas in
response to unanticipated cost changes. These actions by the Commission
should minimize the economic impact for small entities who provide IP
CTS.
83. The Commission considered various proposals from small and
other entities, and the adopted rules reflect its best efforts to
minimize significant economic impact on small entities. The Commission
adjusted the allowable cost categories that it considers in determining
the appropriate compensation formulas for the provisioning of IP CTS to
allow small and other providers to recover costs and benefit
economically from the increased compensation they will receive.
Ordering Clauses
84. Pursuant to sections 1, 2, and 225 of the Communications Act of
1934, as amended, 47 U.S.C. 151, 152, 225, the Report and Order is
ADOPTED and the Commission's rules are hereby AMENDED as set forth.
Congressional Review Act
85. The Commission sent a copy of the Report and Order to Congress
and the Government Accountability Office pursuant to 5 U.S.C.
801(a)(1)(A).
Final Paperwork Reduction Act of 1995 Analysis
86. The Report and Order does not contain new or modified
information collection requirements subject to the Paperwork Reduction
Act of 1995, Public Law 104-13. Therefore, it does not contain any new
or modified information collection burden for small business concerns
with fewer than 25 employees, pursuant to the Small Business Paperwork
Reduction Act of 2002, Public Law 107-198. See 44 U.S.C. 3506(c)(4).
List of Subjects in 47 CFR Part 64
Individuals with disabilities, Telecommunications, Telephones.
Federal Communications Commission.
Marlene Dortch,
Secretary, Office of the Secretary.
Final Rules
For the reasons discussed in the preamble, the Federal
Communications Commission amends 47 CFR part 64 as follows:
PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS
Subpart F--Telecommunications Relay Services and Related Customer
Premises Equipment for Persons With Disabilities
0
1. The authority citation for part 64, subpart F, continues to read as
follows:
Authority: 47 U.S.C. 151-154; 225, 255, 303(r), 616, and 620.
0
2. Add Sec. 64.641 to read as follows:
Sec. 64.641 Compensation for Internet Protocol Captioned Telephone
Service.
(a) Captioning with only automatic speech recognition technology.
For the period from November 1, 2024, through June 30, 2029, TRS Fund
compensation for the provision of Internet Protocol Captioned Telephone
Service when captioning is produced using only automatic speech
recognition technology (ASR-only IP CTS) shall be as described in this
paragraph (a).
(1) Initial rate. For the period from November 1, 2024, through
June 30, 2025, the Compensation Level for ASR-only IP CTS shall be
$1.17 per minute.
(2) Second year rate. For the period from July 1, 2025, through
June 30, 2026, the Compensation Level for ASR-only IP CTS shall be
$1.05 per minute.
(3) Rates for subsequent years. For the period from July 1, 2026,
through June 30, 2029, the Compensation Level for ASR-only IP CTS shall
be $0.95 per minute.
(b) Captioning with communications assistants. For the period from
November 1, 2024, through June 30, 2029, TRS Fund compensation for the
provision of internet Protocol Captioned Telephone Service when
captioning is produced with communications assistants (CA-assisted IP
CTS) shall be as described in this paragraph (b).
(1) Initial rate. For the period from November 1, 2024, through
June 30, 2025, the Compensation Level for CA-assisted IP CTS shall be
$1.35 per minute.
(2) Succeeding years. For each succeeding TRS Fund Year through
June 30, 2029, the per-minute CA-assisted Compensation Level shall be
determined in accordance with the following equation:
Equation 1 to Paragraph (b)(2)
L<INF>FY</INF> = L<INF>FY-1</INF>*(1+AF<INF>FY</INF>)
Where L<INF>FY</INF> is the CA-assisted Compensation Level for the
new Fund Year, L<INF>FY-1</INF> is the CA-assisted Compensation
Level for the previous Fund Year, and AF<INF>FY</INF> is the
Adjustment Factor for the new Fund Year.
(3) Adjustment Factor. The Adjustment Factor for a Fund Year
(AF<INF>FY</INF>), to be determined annually on or before June 30, is
equal to the difference between the Initial Value and the Final Value,
as defined in paragraphs (b)(3)(i) and (ii) of this section, divided by
the Initial Value. The Initial Value and Final Value, respectively, are
the values of the Employment Cost Index compiled by the Bureau of Labor
Statistics, U.S. Department of Labor, for total compensation for
private industry workers in professional, scientific, and technical
services, for the following periods:
(i) Final Value. The fourth quarter of the Calendar Year ending 6
months before the beginning of the Fund Year; and
(ii) Initial Value. The fourth quarter of the preceding Calendar
Year.
[[Page 71860]]
(c) Supplemental Compensation for CA-assisted IP CTS. For the
period from November 1, 2024, through June 30, 2029, Supplemental
Compensation for CA-assisted IP CTS may be paid in accordance with this
paragraph (c) to any of the following four IP CTS providers currently
certified to provide CA-assisted IP CTS: CaptionCall, ClearCaptions,
Hamilton, InnoCaption (Certified Providers).
(1) Initial rate. For the period from November 1, 2024, through
June 30, 2025, the Supplemental Compensation Rate for CA-assisted IP
CTS shall be $0.21 per minute. This rate shall be paid, in addition to
the compensation defined in paragraph (b) of this section, for all
compensable minutes of CA-assisted service provided by a Certified
Provider for which the communications assistant producing captions was
paid an hourly wage of at least $17.20 (the Minimum Hourly Wage).
(2) Succeeding years. (i) For each succeeding TRS Fund Year through
June 30, 2027, the per-minute Supplemental Compensation Rate for CA-
assisted IP CTS shall be determined in accordance with the following
equation:
Equation 2 to Paragraph (c)(2)(i)
L<INF>FY</INF> = L<INF>FY-1</INF>*(1+AF<INF>FY</INF>)
Where L<INF>FY</INF> is the CA-assisted Compensation Level for the
new Fund Year, L<INF>FY-1</INF> is the CA-assisted Compensation
Level for the previous Fund Year, and AF<INF>FY</INF> is the
Adjustment Factor for the new Fund Year, as defined by paragraph
(b)(3) of this section.
(ii) The rate in paragraph (c)(2)(i) of this section shall be paid,
in addition to the compensation defined in paragraph (b) of this
section, for all compensable minutes of CA-assisted service provided by
a Certified Provider for which the communications assistant producing
captions was paid a Minimum Hourly Wage of at least the amount
determined by the following equation:
Equation 3 to Paragraph (c)(2)(ii)
W<INF>FY</INF> = W<INF>FY-1</INF>*(1+AF<INF>FY</INF>)
Where W<INF>FY</INF> is the Minimum Hourly Wage for the new Fund
Year, W<INF>FY-1</INF> is the Minimum Hourly Wage for the previous
Fund Year, and AF<INF>FY</INF> is the Adjustment Factor for the new
Fund Year, as defined by paragraph (b)(3) of this section.
(3) Verification and offset. The initial payment of Supplemental
Compensation for CA-assisted IP CTS is a preliminary payment only and
is conditional on subsequent verification by audit that the CAs
producing captions for those minutes for which the supplement was paid
actually were paid the hourly rate claimed by the provider. The
Certified Provider is responsible for ensuring and documenting the
accuracy of its representations to the TRS Fund administrator regarding
the wages paid to each affected CA, whether such wages were paid by the
Certified Provider or by a subcontractor. In such subsequent audit, if
a Certified Provider fails to produce documentation, satisfactory to
the TRS Fund administrator, verifying the hourly rate paid to affected
CAs--whether employed by the Certified Provider or a subcontractor--
then the administrator is entitled to immediately reclaim any prior
payments of Supplemental Compensation for minutes handled by such CAs,
by offsetting such prior payments against any amounts claimed in the
provider's next monthly compensation request.
(d) Exogenous cost adjustments. In addition to the applicable per-
minute Compensation Level, an IP CTS provider shall be paid a per-
minute exogenous cost adjustment if claims for exogenous cost recovery
are submitted by the provider and approved by the Commission on or
before June 30. Such exogenous cost adjustment shall equal the amount
of such approved claims divided by the provider's projected IP CTS
minutes for the Fund Year. An exogenous cost adjustment shall be paid
if an IP CTS provider incurs well-documented costs that:
(1) Belong to a category of costs that the Commission has deemed
allowable;
(2) Result from new TRS requirements or other causes beyond the
provider's control;
(3) Are new costs that were not factored into the applicable
compensation formula(s); and
(4) If unrecovered, would cause a provider's current allowable-
expenses-plus-allowed-operating margin to exceed its revenues.
[FR Doc. 2024-19559 Filed 9-3-24; 8:45 am]
BILLING CODE 6712-01-P
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</html>This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.